INTERACTIVE SYSTEMS WORLDWIDE INC. Warrant for the Purchase of Shares of Common Stock, par value $.001 per share This Warrant Expires at 5 p.m., New York City time, May 15, 2009
Exhibit
4.2
THE
WARRANT REPRESENTED BY THIS CERTIFICATE AND AGREEMENT AND THE SHARES ISSUABLE
UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES
NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE
TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS
EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE
COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH
COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER
CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR
APPLICABLE STATE SECURITIES LAWS.
INTERACTIVE
SYSTEMS WORLDWIDE INC.
Warrant
for the Purchase of Shares of Common Stock,
par
value
$.001 per share
This
Warrant Expires at 5 p.m., New York City time, May 15, 2009
|
No.
22
|
150,000
Shares
|
THIS
CERTIFIES that, for value received, Faraway Partners LLC, a New Jersey LLC
with
an address at 000 Xxxx Xxxxxxxx Xxxxxx, Xxxxxxxxx Xxxxxx, Xxx Xxxxxx 00000
(the
“Holder”), is entitled to subscribe for and purchase from Interactive Systems
Worldwide Inc. a Delaware corporation (the “Company”), upon the terms and
conditions set forth herein, at any time, or from time to time, commencing
on
July 1, 2006 (except as hereinafter provided), and before 5:00 p.m. on May
15,
2009, New York City time (the “Exercise Period”), 150,000 shares of the
Company’s Common Stock, par value $.001 per share (“Common Stock”), at a price
equal to $2.13 per share (“Exercise Price”). As used herein the term “Warrant”
shall mean and include this Warrant and any Warrant or Warrants hereafter issued
as a consequence of the exercise or transfer of this Warrant in whole or in
part. In accordance with the terms of a letter agreement dated May 15, 2006
between the Holder and the Company, the number of shares subject to this Warrant
may be reduced to a Warrant to purchase 75,000 of the Company’s Common Stock
under certain circumstances.
The
number of shares of Common Stock issuable upon exercise of the Warrants (the
“Warrant Shares”), the Exercise Price and the Exercise Period may be adjusted
from time to time as hereinafter set forth.
1. This
Warrant may be exercised during the Exercise Period, as to the whole or any
lesser number of whole Warrant Shares, but in no event less than 10,000 Warrant
Shares, unless less than 10,000 Warrant Shares remain exercisable on the
Exercise Date, by the surrender of this Warrant (with the “election to exercise”
at the end hereof duly executed) to the Company at its office at 0 Xxxxxxx
Xxxxx, 0xx
Xxxxx,
Xxxx Xxxxxxxxx, Xxx Xxxxxx 00000, or at such other place as is designated in
writing by the Company. Such executed election must be accompanied by payment
in
an amount (the “Stock Purchase Price”) equal to the Exercise Price multiplied by
the number of Warrant Shares for which this Warrant is being exercised. Such
payment shall be made by certified or bank cashier’s check payable to the order
of the Company.
2. Upon
each
exercise of the Holder’s rights to purchase Warrant Shares, the Holder shall be
deemed to be the holder of record of the Warrant Shares issuable upon such
exercise, notwithstanding that the transfer books of the Company shall then
be
closed or certificates representing such Warrant Shares shall not then have
been
actually delivered to the Holder. As soon as practicable after each such
exercise of this Warrant, the Company shall issue and deliver to the Holder
a
certificate or certificates for the Warrant Shares issuable upon such exercise,
registered in the name of the Holder or its designee. If this Warrant should
be
exercised in part only, the Company shall, upon such exercise, execute and
deliver a new Warrant evidencing the right of the Holder to purchase the balance
of the Warrant Shares subject to purchase hereunder.
3. (a) Any
Warrant issued upon exercise in part of this Warrant shall be numbered and
shall
be registered in a warrant register (the “Warrant Register”) as they are issued.
The Company shall be entitled to treat the registered holder of the Warrant
on
the Warrant Register as the owner in fact thereof for all purposes and shall
not
be bound to recognize any equitable or other claim to or interest in such
Warrant on the part of any other person, and shall not be liable for any
registration or transfer of Warrants which are registered or to be registered
in
the name of a fiduciary or the nominee of a fiduciary unless made with the
actual knowledge that a fiduciary or nominee is committing a breach of trust
in
requesting such registration or transfer, or with the knowledge of such facts
that its participation therein amounts to bad faith. This Warrant shall not
be
transferable by the Holder except as herein specifically provided or by the
Holder’s authorized attorney or representative, or accompanied by proper
evidence of succession, assignment (in accordance with the terms hereof), or
authority to transfer. In all cases of transfer by an attorney, executor,
administrator, guardian, or other legal representative, duly authenticated
evidence of his or its authority shall be produced. Upon any registration of
transfer, the Company shall deliver a new Warrant or Warrants to the person
entitled thereto. This Warrant may be exchanged, at the option of the Holder
thereof, for another Warrant, or other Warrants of different denominations,
of
like tenor and representing in the aggregate the right to purchase a like number
of Warrant Shares (or portions thereof), upon surrender to the Company or its
duly authorized agent; provided that Warrants exercisable for less than 10,000
Warrant Shares may not be issued, unless that is the remaining number of Warrant
Shares for which the Warrant is exercisable. Notwithstanding the foregoing,
the
Company shall have no obligation to cause Warrants to be transferred on its
books to any person if, in the opinion of counsel to the Company, such transfer
does not comply with the provisions of the Securities Act of 1933, as amended
(the “Act”), and the rules and regulations thereunder.
2
(b) The
Holder acknowledges that he has been advised by the Company that neither this
Warrant nor the Warrant Shares have been registered under the Act, that this
Warrant is being or has been issued and the Warrant Shares may be issued on
the
basis of the statutory exemption provided by Section 4(2) of the Act or
Regulation D promulgated thereunder, or both, relating to transactions by an
issuer not involving any public offering, and that the Company’s reliance
thereon is based in part upon the representations made by the Holder in Exhibit
A attached hereto. The Holder acknowledges that he has been informed by the
Company of, or is otherwise familiar with, the nature of the limitations imposed
by the Act and rules and regulations thereunder on the transfer of securities.
In particular, the Holder agrees that no sale, assignment or transfer of this
Warrant or the Warrant Shares issuable upon exercise hereof shall be valid
or
effective, and the Company shall not be required to give any effect to any
such
sale, assignment or transfer, unless (i) the sale, assignment or transfer of
this Warrant or such Warrant Shares is registered under the Act, it being
understood that neither this Warrant nor such Warrant Shares are currently
registered for sale and that the Company has no obligation or intention to
so
register this Warrant or such Warrant Shares, except as specifically provided
herein, or (ii) the Warrant Shares are sold, assigned or transferred in
accordance with all the requirements and limitations of Rule 144 under the
Act
or (iii) such sale, assignment, or transfer is otherwise exempt form
registration under the Act.
4. The
Company shall at all times reserve and keep available out of its authorized
and
unissued Common Stock, solely for the purpose of providing for the exercise
of
the rights to purchase all Warrant Shares granted pursuant to this Warrant,
such
number of shares of Common Stock as shall, from time to time, be sufficient
therefor. The Company covenants that all shares of Common Stock issuable upon
exercise of this Warrant, upon receipt by the Company of the full Exercise
Price
therefor, shall be validly issued, fully paid, nonasessable, and free of
preemptive rights.
5. (a) In
case
the Company shall at any time after the date the Warrant was first issued (i)
subdivide the outstanding Common Stock, (ii) combine the outstanding Common
Stock into a smaller number of shares, or (iii) issue any shares of its capital
stock by reclassification of the Common Stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing corporation), then, in each case, the Exercise Price,
and the number of Warrant Shares issuable upon exercise of this Warrant, in
effect at the time of the effective date of such subdivision, combination,
or
reclassification, shall be proportionately adjusted so that the Holder after
such time shall be entitled to receive the aggregate number and kind of shares
which, if such Warrant had been exercised immediately prior to such time, such
Holder would have owned upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, combination, or reclassification. Such
adjustment shall be made successively whenever any event listed above shall
occur.
3
(b) For
the
purpose of any computation under this Section 5, the Current Market Price
per share of Common Stock on any date shall be deemed to be the average of
the
daily closing prices for the 15 consecutive trading days immediately preceding
the date in question. The closing price for each day shall be the last reported
sales price regular way or, in case no such reported sale takes place on such
day, the closing bid price regular way, in either case on the principal national
securities exchange (including, for purposes hereof, the NASDAQ National Market
or Small Cap Market) on which the Common Stock is listed or admitted to trading
or, if the Common Stock is not listed or admitted to trading on any national
securities exchange, the highest reported bid price for the Common Stock as
furnished by the National Association of Securities Dealers, Inc. through NASDAQ
or a similar organization if NASDAQ is no longer reporting such information.
If
on any such date the Common Stock is not listed or admitted to trading on any
national securities exchange and is not quoted by NASDAQ or any similar
organization, the fair value of a share of Common Stock on such date, as
determined in good faith by the Board of Directors of the Company, whose
determination shall be conclusive absent manifest error, shall be
used.
(c) In
any
case in which this Section 5 shall require that an adjustment in the
Exercise Price be made effective as of a record date for a specified event,
the
Company may elect to defer, until the occurrence of such event, issuing to
the
Holder, if the Holder exercised this Warrant after such record date, the shares
of Common Stock, if any, issuable upon exercise on the basis of the Exercise
Price in effect prior to such adjustment; provided, however, that the Company
shall deliver to the Holder a due bill or other appropriate instrument
evidencing the Holder’s right to receive such additional shares upon the
occurrence of the event requiring such adjustment.
(d) Whenever
there shall be an adjustment as provided in this Section 5, the Company
shall promptly cause written notice thereof to be sent by certified or
registered mail, postage prepaid, to the Holder, at its address as it shall
appear in the Warrant Register, which notice shall be accompanied by an
officer’s certificate setting forth the number of Warrant Shares purchasable
upon the exercise of this Warrant and the Exercise Price after such adjustment
and setting forth a brief statement of the facts requiring such adjustment
and
the computation thereof, which officer’s certificate shall be conclusive
evidence of the correctness of any such adjustment absent manifest
error.
(e) The
Company shall not be required to issue fractions of shares of Common Stock
or
other capital stock of the Company upon the exercise of this Warrant. If any
fraction of a share would be issuable on the exercise of this Warrant (or
specified portions thereof), the Company shall purchase such fraction for an
amount in cash equal to the same fraction of the Current Market Price of such
share of Common Stock on the date of exercise of this Warrant.
6. (a) In
case
of any consolidation with or merger of the Company with or into another
corporation or entity (other than a merger or consolidation in which the Company
is the surviving or continuing corporation), or in case of any sale, lease
or
conveyance of all or substantially all of the property and assets of the
Company, or of the property and assets of the Company as an entirety or
substantially as an entirety, such successor, leasing, or purchasing corporation
or entity, as the case may be, shall (i) execute with the Holder an
agreement providing that the Holder shall have the right thereafter to receive
upon exercise of this Warrant solely the kind and amount of shares of stock
and
other securities, property, cash, or any combination thereof receivable upon
such consolidation, merger, sale, lease, or conveyance by a holder of the number
of shares of Common Stock for which this Warrant might have been exercised
immediately prior to such consolidation, merger, sale, lease, or conveyance,
and
(ii) make effective provision in its certificate of incorporation or
otherwise, if necessary, to effect such agreement. Such agreement shall provide
for adjustments which shall be as nearly equivalent as practicable to the
adjustments in Section 5.
4
(b) In
case
of any reclassification or change of the shares of Common Stock issuable upon
exercise of this Warrant (other than a change in par value or from no par value
to a specified par value, or as a result of a subdivision or combination, but
including any change in the shares into two or more classes or series of
shares), or in case of any consolidation or merger of another corporation into
the Company in which the Company is the continuing corporation and in which
there is a reclassification or change (including a change to the right to
receive cash or other property) of the shares of Common Stock (other than a
change in par value, or from no par value to a specified par value, or as a
result of a subdivision or combination, but including any change in the shares
into two or more classes or series of shares), the Holder shall have the right
thereafter to receive upon exercise of this Warrant solely the kind and amount
of shares of stock and other securities, property, cash, or any combination
thereof receivable upon such reclassification, change, consolidation, or merger
by a holder of the number of shares of Common Stock for which this Warrant
might
have been exercised immediately prior to such reclassification, change,
consolidation, or merger. Thereafter, appropriate provision shall be made for
adjustments which shall be as nearly equivalent as practicable to the
adjustments in Section 5.
(c) Notwithstanding
anything to the contrary herein contained, in the event of a transaction
contemplated by Section 6(a) or similar transaction in which the surviving,
continuing, successor, or purchasing person, corporation or entity demands
that
all outstanding Warrants be extinguished prior to the closing date of the
contemplated transaction, the Company shall give prior notice (the “Merger
Notice”) thereof to the Holder advising them of such transaction. The Holder
shall have ten days after the date of the Merger Notice to elect to (i) exercise
the Warrants in the manner provided herein or (ii) receive from the surviving,
continuing, successor, or purchasing corporation the same consideration
receivable by a holder of the number of shares of Common Stock for which this
Warrant might have been exercised immediately prior to such consolidation,
merger, sale, or purchase reduced by such amount of the consideration as has
a
market value equal to the Exercise Price, as determined by the Board of
Directors of the Company, whose determination shall be conclusive and binding.
If any Holder fails to timely notify the Company of its election, the Holder
shall be deemed for all purposes to have elected the option set forth in (ii)
above. Any amounts receivable by a Holder who has elected the option set forth
in (ii) above shall be payable at the same time as amounts payable to
stockholders in connection with any such transactions.
5
(d) The
above
provisions of this Section 6 shall similarly apply to successive
reclassifications and changes of shares of Common Stock and to successive
consolidations, mergers, sales, leases, or conveyances.
7. In
case
at any time the Company shall propose to:
(a) effect
any reclassification or change of outstanding shares of Common Stock, or any
consolidation, merger, sale, lease, or conveyance of property, described in
Section 6; or
(b) effect
any liquidation, dissolution, or winding-up of the Company; or
(c) take
any
other action which would cause an adjustment to the Exercise Price;
then,
and
in any one or more of such cases, the Company shall give written notice thereof,
by certified or registered mail, postage prepaid, to the Holder at the Holder’s
address as it shall appear on the Warrant Register, mailed at least ten days
prior to (i) the date as of which the holders of record of shares of Common
Stock to be entitled to receive any such dividend, distribution, rights,
warrants, or other securities are to be determined, (ii) the date on which
any
such reclassification, change of outstanding shares of Common Stock,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up is expected to become effective, and the date as
of
which it is expected that holders of record of shares of Common Stock shall
be
entitled to exchange their shares for securities or other property, if any,
deliverable upon such reclassification, change of outstanding shares,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up, or (iii) the date of such action which would require
an adjustment to the Exercise Price.
8. The
issuance of any shares or other securities upon the exercise of this Warrant,
and the delivery of certificates or other instruments representing such shares
or other securities, shall be made without charge to the Holder for any tax
or
other charge in respect of such issuance. The Company shall not, however, be
required to pay any tax which may be payable in respect of any transfer involved
in the issue and delivery of any certificate in a name other than that of the
Holder and the Company shall not be required to issue or deliver any such
certificate unless and until the person or persons requesting the issue thereof
shall have paid to the Company the amount of such tax or shall have established
to the satisfaction of the Company that such tax has been paid, and the Company
shall not be responsible to pay any income tax, if any, payable by the Holder
upon exercise of this Warrant.
6
(a) If,
at
any time following the date of issuance of this Warrant, the Company shall
file
a registration statement (other than any registration statement on
Form S-4, Form S-8, or any successor or comparable form) with the
Securities and Exchange Commission (the “Commission”) while any Registrable
Securities (as hereinafter defined) are outstanding, and for any reason any
Eligible Holder (as hereinafter defined) will not otherwise have, as of the
effective date of such registration statement, the benefit of an effective
registration statement, registering for sale such Eligible Holders’ Registrable
Securities, the Company shall give all such Eligible Holders at least ten days
prior written notice of the filing of such registration statement. If requested
by any such Eligible Holder in writing within five days after receipt of any
such notice, the Company shall, at the Company’s sole expense (other than the
fees and disbursements of counsel for such Eligible Holders and the underwriting
discounts, if any, payable in respect of the Registrable Securities registered
or sold by any such Eligible Holder), register or qualify all or, at each such
Eligible Holder’s option, any portion of the Registrable Securities of any such
Eligible Holders who shall have made such request, concurrently with the
registration of such other securities, all to the extent requisite to permit
the
public offering and sale of such Eligible Holders’ Registrable Securities
through the facilities of all appropriate securities exchanges and the
over-the-counter market, and will use its commercially reasonable efforts
through its officers, directors, auditors, and counsel to cause such
registration statement to become effective as promptly as practicable.
Notwithstanding the foregoing, if the managing underwriter of any such offering,
if any, shall advise the Company in writing that, in its opinion, the
distribution of all or a portion of the Registrable Securities requested to
be
included in the registration concurrently with the securities being registered
by the Company would materially adversely affect the distribution of such
securities by the Company for its own account, then any Eligible Holder who
shall have requested registration of his or its Registrable Securities shall
not
be entitled to have such Eligible Holder’s Registrable Securities (or the
portions thereof so designated by such managing underwriter, included in such
registration statement, provided that no such exclusion or reduction shall
be
made as to any Registrable Securities if any securities of the Company are
included in such registration statement for the account of any person other
than
the Company and any Eligible Holder unless the securities so included in such
registration statement for each such other person or persons requesting
registration shall have been reduced by the same proportion (based upon the
total amount of securities for which each person has requested registration
in
such registration statement) as the Registrable Securities which were requested
to be included in such registration were reduced. As used herein (i)
“Registrable Securities” shall mean the Warrant Shares, if any, which in each
case, have not previously been sold pursuant to a registration statement or
Rule
144 promulgated under the Act and (ii) “Eligible Holders” shall mean the then
holders of Registrable Securities.
(b) In
the
event of a registration pursuant to the provisions of this Section 8, the
Company shall use its commercially reasonable efforts to cause the Registrable
Securities so registered to be registered or qualified for sale under the
securities or blue sky laws of such jurisdictions as the Holder or such holders
may reasonably request; provided, however, that the Company shall not by reason
of this Section 8(b) be required to qualify to do business in any state in
which
it is not otherwise required to qualify to do business or to file a general
consent to service process.
7
(c) The
Company shall keep effective any registration or qualification contemplated
by
this Section 8 and shall from time to time amend or supplement each applicable
registration statement, preliminary prospectus, final prospectus, application,
document, and communication for such period of time as shall be required to
permit the Eligible Holders to complete the offer and sale of the Registrable
Securities covered thereby; provided, however, that the Company shall in no
event be required to keep registration or qualification under Section 8(a)
above
in effect for more than two years from the effective date thereof; provided,
however, that, if the Company is required to keep any such registration or
qualification in effect with respect to securities other than the Registrable
Securities beyond such period, the Company shall keep such registration or
qualification in effect as it relates to the Registrable Securities for so
long
as such registration or qualification remains or is required to remain in effect
in respect of such other securities.
(d) In
the
event of a registration pursuant to the provisions of this Section 8, the
Company shall furnish to each Eligible Holder such number of copies of the
registration statement and of each amendment and supplement thereto (in each
case, including all exhibits), such number of copies of each prospectus
contained in such registration statement and each supplement or amendment
thereto (including each preliminary prospectus), all of which shall conform
to
the requirements of the Act and the rules and regulations thereunder, and such
other documents, as any Eligible Holder may reasonably request to facilitate
the
disposition of the Registrable Securities included in such
registration.
(e) The
Company agrees that, until all the Registrable Securities have been sold under
a
registration statement or pursuant to Rule 144 under the Act, it shall use
its
commercially reasonable efforts to keep current in filing all reports,
statements and other materials required to be filed with the Commission to
permit holders of the Registrable Securities to sell such securities under
Rule
144.
9. (a) Subject
to the conditions set forth below, the Company agrees to indemnify and hold
harmless each Eligible Holder, its officers, directors, partners, employees,
agents, and counsel, and each person, if any, who controls any such person
within the meaning of Section 15 of the Act or Section 20(a) of the Securities
and Exchange Act of 1934, as amended (the “Exchange Act”), from and against any
and all loss, liability, charge, claim, damage, and expense whatsoever (which
shall include, for all purposes of this Section 9, without limitation,
reasonable attorneys’ fees and any reasonable expense incurred in investigating,
preparing, or defending against any litigation, commenced or threatened, or
any
claim whatsoever, and any and all amounts paid in settlement of any claim of
litigation), as and when incurred, arising out of, based upon, or in connection
with (i) any untrue statement or alleged untrue statement of a material fact
contained (A) in any registration statement, preliminary prospectus, or final
prospectus (as from time to time amended and supplemented), or any amendment
or
supplement thereto, relating to the sale of any of the Registrable Securities,
or (B) in any application or other document or communication (in this Section
9
collectively called an “application”) executed by or on behalf of the Company or
based upon written information furnished by or on behalf of the Company filed
in
any jurisdiction in order to register or qualify any of the Registrable
Securities under the securities or blue sky laws thereof or filed with the
Commission or any securities exchange; or any omission or alleged omission
to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, unless such statement or omission was made
in
reliance upon and in conformity with written information furnished to the
Company with respect to such Eligible Holder by or on behalf of such person
expressly for inclusion in any registration statement, preliminary prospectus,
or final prospectus, or any amendment or supplement thereto, or in any
application, as the case may be, or (ii) any breach of any representation,
warranty, covenant, or agreement of the Company contained in this
Warrant.
8
If
any
action is brought against any Eligible Holder or any of its officers, directors,
partners, employees, agents, or counsel, or any controlling persons of such
person (an “indemnified party”) in respect of which indemnity may be sought
against the Company pursuant to the foregoing paragraph, such indemnified party
or parties shall promptly notify the Company in writing of the institution
of
such action and the Company shall promptly assume the defense of such action
with counsel selected by the Company. Such indemnified party or parties shall
have the right to employ its or their own counsel in any such case, but the
fees
and expenses of such counsel shall be at the expense of such indemnified party
or parties unless the employment of such counsel shall have been authorized
in
writing by the Company in connection with the defense of such action or the
Company shall not have employed counsel to have charge of the defense of such
action or such indemnified party or parties shall have reasonably concluded
that
there may be one or more legal defenses available to it or them which are
different from or in addition to those available to the Company, in any of
which
events such reasonable fees and expenses shall be borne by the Company and
the
Company shall not have the right to direct the defense of such action on behalf
of the indemnified party or parties. Anything in this Section 9 to the contrary
notwithstanding, the Company shall not be liable for any settlement of any
such
claim or action effected without its written consent, which shall not be
unreasonably withheld. The Company agrees promptly to notify the Eligible
Holders of the commencement of any litigation or proceedings against the Company
or any of its officers or directors in connection with the sale of any
Registrable Securities or any preliminary prospectus, prospectus, registration
statement, or amendment or supplement thereto, or any application relating
to
any sale of any Registrable Securities.
(b) The
Holder agrees to indemnify and hold harmless the Company, each director of
the
Company, each officer of the Company who shall have signed any registration
statement covering Registrable Securities held by the Holder, each other person,
if any, who controls the Company within the meaning of Section 15 of the Act
or
section 20(a) of the Exchange Act, and its or their respective counsel, to
the
same extent as the foregoing indemnity from the Company to the Eligible Holders
in Section 9(a), but only with respect to statements or omissions, if any,
made
in any registration statement, preliminary prospectus, or final prospectus
or
any amendment or supplement thereto, or in any application, in reliance upon
and
in conformity with written information furnished to the Company with respect
to
the Holder by or on behalf of the Holder expressly for inclusion in any such
registration statement, preliminary prospectus, or final prospectus, or any
amendment or supplement thereto, or in any application, as the case may be.
If
any action shall be brought against the Company or any other person so
indemnified based on any such registration statement, preliminary prospectus,
or
final prospectus, or any amendment or supplement thereto, or in any application,
and in respect of which indemnity may be sought against the Holder pursuant
to
this Section 9(b), the Holder shall have the rights and duties given to the
Company, and the Company and each other person so indemnified shall have the
rights and duties given to the indemnified parties, by the provisions of Section
9(a).
9
(c) To
provide for just and equitable contribution, if (i) and indemnified party makes
a claim for indemnification pursuant to Section 9(a) or 9(b) (subject to the
limitations thereof) but it is found in a final judicial determination, not
subject to further appeal, that such indemnification may not be enforced in
such
case, even though this Warrant expressly provides for indemnification in such
case, or (ii) any indemnified or indemnifying party seeks contribution under
the
Act, the Exchange Act or otherwise, then the Company (including for this purpose
any contribution made by or on behalf of any director of the Company, any
officer of the Company who signed any such registration statement, any
controlling person of the Company, and its or their respective counsel), as
one
entity, and the Eligible Holders of the Registrable Securities included in
such
registration in the aggregate (including for this purpose any contribution
by or
on behalf of an indemnified party), as a second entity, shall contribute to
the
losses, liabilities, claims, damages, and expenses whatsoever to which any
of
them may be subject, on the basis of relevant equitable considerations such
as
the relative fault of the Company and such Eligible Holders in connection with
the facts which resulted in such losses, liabilities, claims, damages, and
expenses. The relative fault, in the case of an untrue statement, alleged untrue
statement, omission, or alleged omission, shall be determined by, among other
things, whether such statement, alleged statement, omission, or alleged omission
relates to information supplied by the Company or by such Eligible Holders,
and
the parties’ relative intent, knowledge, access to information, and opportunity
to correct or prevent such statement, alleged statement, omission, or alleged
omission. In no case shall any Eligible Holder be responsible for a portion
of
the contribution obligation imposed on all Eligible Holders in excess of its
pro
rata share based on the number of Registrable Securities owned by it and
included in such registration as compared to the number of Registrable
Securities owned by all Eligible Holders and included in such registration.
No
person guilty of a fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who is
not
guilty of such fraudulent representation. For purposes of this Section 9(c),
each person, if any, who controls any Eligible Holder within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act and each officer,
director, partner, employee, agent, and counsel of each such Eligible Holder
or
control person shall have the same rights to contribution as each Eligible
Holder or control person and each person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act, each officer of the Company who shall have signed any such registration
statement, each director of the Company, and its or their respective counsel
shall have the same rights to contribution as the Company, subject in each
case
to the provisions of this Section 9(c). Anything in this Section 9(c) to the
contrary notwithstanding, no party shall be liable for contribution with respect
to the settlement of any claim or action effected without its written consent.
This Section 9(c) is intended to supersede any right to contribution under
the
Act, the Exchange Act or otherwise.
10
10. Unless
registered pursuant to the provisions of Section 8 hereof, the Warrant Shares
issued upon exercise of this Warrant shall be subject to a stop transfer order
and the certificate or certificates evidencing such Warrant Shares shall bear
the following legend:
“THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS AND
NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED,
ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH
RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH
SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE
COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR
TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS.”
In
the
event the Warrant Shares are registered pursuant to Section 8, the
foregoing legend will be replaced by a legend reflecting the regulatory
requirements applicable to the resale of registered shares.
11. Upon
receipt of evidence of satisfactory to the Company of the loss, theft,
destruction, or mutilation of any Warrant (and upon surrender of any Warrant
if
mutilated), and upon reimbursement of the Company’s reasonable incidental
expenses and indemnity reasonably satisfactory to the Company, the Company
shall
execute and deliver to the Holder thereof a new Warrant of like date, tenor,
and
denomination.
12. The
Holder of any Warrant shall not have solely on account of such status, any
rights of a stockholder of the Company, either at law or in equity, or to any
notice of meetings of stockholders or of any other proceedings of the Company,
except as provided by this Warrant.
13. This
Warrant has been negotiated and consummated in the State of New York and
shall be construed in accordance with the laws of the State of New York
applicable to contracts made and performed within such State, without regard
to
principles governing conflicts of law.
11
14. The
Company and the Holders irrevocably consent to the jurisdiction of the courts
of
the State of New York and of any federal court located in such State in
connection with any action or proceeding arising out of or relating to this
Warrant, any document or instrument delivered pursuant to, in connection with
or
simultaneously with this Warrant, or a breach of this Warrant or any such
document or instrument. In any such action or proceeding, the Company and the
Holders waive personal service of any summons, complaint or other process and
agrees that service thereof may be made in accordance with Section 15
hereof.
15. Any
notice or other communication required or permitted to be given hereunder shall
be in writing and shall be mailed by certified mail, return receipt requested,
or by Federal Express, Express Mail or similar overnight delivery or courier
service or delivered (in person or by telecopy, telex or similar
telecommunications equipment) against receipt to the party to whom it is to
be
given, (i) if to the Company, at 0 Xxxxxxx Xxxxx, 0xx
Xxxxx,
Xxxx Xxxxxxxx, Xxx Xxxxxx 00000, (fax: 000-000-0000) Attention: President,
with
a copy to Xxxxxxxx Xxxxxx Xxxxxx & Xxxxxxx LLP, 0000 Xxxxxxxx,
00xx
Xxxxx,
Xxx Xxxx, Xxx Xxxx 00000, (fax: 000 000-0000) Attention: Xxxxxxx X. Xxxxxxx,
Esq., (ii) if to the Holder, at its address set forth on the first page hereof,
or (iii) in either case, to such other address as the party shall have furnished
in writing in accordance with the provisions of this Section 15. Notice to
the
estate of any party shall be sufficient if addressed to the party as provided
in
this Section 15. Any notice or other communication given by certified mail
shall
be deemed given at the time of certification thereof, except for a notice
changing a party’s address which shall be deemed given at the time of receipt
thereof. Any notice given by other means permitted by this Section 15 shall
be
deemed given at the time of receipt thereof.
16. No
course
of dealing and no delay or omission on the part of the Holder in exercising
any
right or remedy shall operate as a waiver thereof or otherwise prejudice the
Holder’s rights, powers or remedies. No right, power or remedy conferred by this
Warrant upon the Holder shall be exclusive of any other right, power or remedy
referred to herein or now or hereafter available at law, in equity, by statute
or otherwise, and all such remedies may be exercised singly or
concurrently.
17. This
Warrant may be amended or any of its provisions waived only by a written consent
or consents executed by the Company and Holders of Warrants representing a
majority of the shares underlying the Warrants. Any amendment or waiver shall
be
binding upon all existing and future Holders.
18. This
Warrant is not assignable by the Holder hereof, except pursuant to the laws
of
descent and distribution and any attempted assignment without the Company’s
prior written consent, shall be void.
[remainder
of page intentionally left blank]
12
Dated:
May 15, 2006
|
INTERACTIVE
SYSTEMS WORLDWIDE INC.
|
||
| |
|
|
| By: | /s/ Xxxxxxx Xxxxxxxx | |
|
Name:
Xxxxxxx Xxxxxxxx
|
||
|
Title:
President
|
||
| By: | /s/ Xxxxx XxXxxx | |
|
Name:
Xxxxx XxXxxx
|
||
|
Title:
Chief Financial Officer
|
||
13
| To: |
Interactive Systems Worldwide Inc.
0
Xxxxxxx Xxxxx, 0xx
Xxxxx
Xxxx
Xxxxxxxx, Xxx
Xxxxxx 00000
|
ELECTION
TO EXERCISE
The
undersigned hereby exercises his or its rights to purchase ________ Warrant
Shares covered by the within Warrant and tenders payment herewith in the amount
of $_________________ in accordance with the terms thereof, and requests that
certificates for such securities be issued in the name of, and delivered
to:
|
(Print
Name, Address and Social Security or Tax Identification
Number)
|
and,
if
such number of Warrant Shares shall not be all the Warrant Shares covered by
the
within Warrant, that a new Warrant for the balance of the Warrant Shares covered
by the within Warrant be registered in the name of, and delivered to, the
undersigned at the address stated below.
|
Dated:_______________________
|
Name:_________________________ | ||
|
(Print)
|
|||
|
Address:
|
|||
|
(Signature)
|
|||
14
EXHIBIT
A
The
undersigned hereby represents and warrants to, and agrees with, the Company
as
follows:
(a) The
undersigned is an “Accredited Investor” as that term is defined in Section (a)
of Regulation D promulgated under the Securities Act of 1933, as amended (the
“Act”). Specifically, the undersigned is (initial appropriate
items(s)):
_____ i)
A bank
as defined in Section 3(a)(2) of the Act, or a savings and loan association
or
other institution as defined in Section 3(a)(5)(A) of the Act, whether acting
in
its individual or fiduciary capacity; a broker or dealer registered pursuant
to
Section 15 of the Securities Exchange Act of 1934; an insurance company as
defined in Section 2(13) of the Act; an investment company registered under
the
Investment Company Act of 1940 (the “Investment Company Act”) or a business
development company as defined in Section 2(a)(48) of the Investment Company
Act; a Small Business Investment Company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business Investment
Act
of 1958; a plan established and maintained by a state, its political
subdivisions or any agency or instrumentality of a state or its political
subdivisions for the benefit of its employees, if such plan has total assets
in
excess of $5,000,000; an employee benefit plan within the meaning of the
Employee Retirement Income Security Act of 1974 (“ERISA”), if the investment
decision is made by a plan fiduciary, as defined in Section 3(21) of ERISA,
which is either a bank, savings and loan association, insurance company, or
registered investment advisor, or if the employee benefit plan has total assets
in excess of $5,000,000 or, if a self-directed plan,
with
investment decisions made solely by persons that are accredited
investors.
_____ ii)
A
private business development company as defined in Section 202(a)(22) of the
Investment Advisers Act of 1940.
_____ iii)
An
organization described in Section 501(c)(3) of the Internal Revenue Code,
corporation, Massachusetts or similar business trust, or partnership, not formed
for the specific purpose of acquiring the securities offered, with total assets
in excess of $5,000,000.
_____ iv)
A
director or executive officer of the Company.
_____ v)
A
natural person whose individual net worth, or joint net worth with that person’s
spouse, at the time of his or her purchase exceeds $1,000,000.
_____
(vi)
A
natural person who had an individual income in excess of $200,000 in each of
the
two most recent years or joint income with that person’s spouse in excess of
$300,000 in each of those years and has a reasonable expectation of reaching
the
same income level in the current year.
_____
(vii)
A
trust, with total assets in excess of $5,000,000, not formed for the specific
purpose of acquiring the securities offered, whose purchase is directed by
a
sophisticated person as described in Rule 506(b)(2)(ii) (i.e.,
a person
who has such knowledge and experience in financial and business matters that
he
is capable of evaluating the merits and risks of the prospective
investment).
15
_____ viii)
An
entity in which all of the equity owners are accredited investors.
(b) For
California and Massachusetts individuals: If the subscriber is a California
resident, such subscriber’s investment in the Company will not exceed 10% of
such subscriber’s net worth (or joint net worth with his spouse). If the
subscriber is a Massachusetts resident, such subscriber’s investment in the
Company will not exceed 25% of such subscriber’s joint net worth with his spouse
(exclusive of principal residence and its furnishings).
(c) If
a
natural person, the undersigned is: a bona fide resident of the State contained
in the address set forth on the signature page of this Agreement as the
undersigned’s home address; at least 21 years of age; and legally competent to
execute this Agreement. If an entity, the undersigned is duly authorized to
execute this Agreement and this Agreement constitutes the legal, valid and
binding obligation of the undersigned enforceable against the undersigned in
accordance with its terms.
(d) The
undersigned is familiar with the Company’s business, plans and financial
condition, the undersigned has received all materials which have been requested
by the
undersigned; has had a reasonable opportunity to ask questions of the Company
and its representatives; and the Company has answered all inquiries that the
undersigned or the undersigned’s representatives have put to it. The undersigned
has had access to all additional information and has taken all the steps
necessary to evaluate the merits and risks of an investment as proposed
hereunder.
(e) The
undersigned has such knowledge and experience in finance, securities,
investments and other business matters so as to be able to protect the interests
of the undersigned in connection with this transaction, and the undersigned’s
investment in the Company hereunder is not material when compared to the
undersigned’s total financial capacity.
(f) The
undersigned understands the various risks of an investment in the Company as
proposed herein and can afford to bear such risks, including, without
limitation, the risks of losing the entire investment.
(g) The
undersigned acknowledges that no market for the Warrants presently exists and
none may develop in the future and that the undersigned may find it impossible
to liquidate the investment at a time when it may be desirable to do so, or
at
any other time.
16
(h) The
undersigned has been advised by the Company that none of the Warrants have
been
registered under the Act, that the Warrants will be issued on the basis of
the
statutory exemption provided by Section 4(2) of the Act or Regulation D
promulgated thereunder, or both, relating to transactions by an issuer not
involving any public offering and under similar exemptions under certain state
securities laws, that this transaction has not been reviewed by, passed on
or
submitted to any Federal or state agency or self-regulatory organization where
an exemption is being relied upon, and that the Company’s reliance thereon is
based in part upon the representations made by the undersigned in this
Agreement. The undersigned acknowledges that the undersigned has been informed
by the Company of, or is otherwise familiar with, the nature of the limitations
imposed by the Act and the rules and regulations thereunder on the transfer
of
securities, including the Warrants. In particular, the undersigned agrees that
no sale, assignment or transfer of any of the Warrants shall be valid or
effective, and the Company shall not be required to give any effect to such
a
sale, assignment or transfer, unless (i) the sale, assignment or transfer of
such Warrants is registered under the Act, it being understood that the Warrants
are not currently registered for sale and that the Company has no obligation
or
intention to so register the Warrants except as contemplated by the terms of
the
Warrants, or (ii) such Warrants are sold, assigned or transferred in accordance
with all the requirements and limitations of Rule 144 under the Act, it being
understood that Rule 144 is not available at the present time for the sale
of
the Securities, or (iii) such sale, assignment or transfer is otherwise exempt
from registration under the Act. The undersigned further understands that an
opinion of counsel and other documents may be required to transfer the
securities as provided in the Warrants. The undersigned acknowledges that the
Warrants shall be subject to a stop transfer order and the certificate or
certificates evidencing any Warrants shall bear the following or a substantially
similar legend or such other legend as may appear on the forms of Warrants
and
such other legends as may be required by state securities or blue sky
laws:
“The
securities represented by this certificate have not been registered under the
Securities Act of 1933, as amended (the “Act”), or any state securities laws and
neither such securities nor any interest therein may be offered, sold, pledged,
assigned or otherwise transferred unless (1) a registration statement with
respect thereto is effective under the Act and any applicable state securities
laws, or (2) the Company receives an opinion of counsel to the holder of such
securities, which counsel and opinion are reasonably satisfactory to the
Company, that such securities may be offered, sold, pledged, assigned or
transferred in the manner contemplated without an effective registration
statement under the Act or applicable state securities laws.”
17
(i) The
undersigned will acquire the Warrants for the undersigned’s own account for
investment and not with a view to the sale or distribution thereof or the
granting of any participation therein, and has no present intention of
distributing or selling to others any of such interest or granting any
participation therein.
|
Xxxxxx
Capital Partners
|
|||
|
By:
|
|||
|
Name:
|
|||
|
Title:
|
18
